Amazon's New $15 Minimum Wage Will Pressure Other Retailers To Follow Suit

Retail
I cover retail, from fashion to grocery, and its dance with technology

(Photographer: Bess Adler/Bloomberg)

In another move that will likely have a wide ripple effect across the retail industry, Amazon said Tuesday that it will raise its minimum wage for all of its U.S. workers, part-time and seasonal workers included, to $15 an hour.

The new minimum wage, effective Nov. 1, will affect more than 250,000 Amazon employees as well as over 100,000 seasonal employees it plans to hire across the country this holiday season, the Seattle retail giant said. The wage increase will also apply to its Whole Foods employees. Amazon said it will detail the financial impact in its upcoming earnings forecast.

The company said it will begin to advocate for an increase in federal minimum wage, currently at $7.25.

“We listened to our critics, thought hard about what we wanted to do and decided we want to lead,” said Amazon founder and CEO Jeff Bezos. “We’re excited about this change and encourage our competitors and other large employers to join us.”

"What Mr. Bezos has done today is not only enormously important for Amazon’s hundreds of thousands of employees, it could well be a shot heard around the world," Sanders said in a tweet. "I urge corporate leaders around the country to follow Mr. Bezos' lead."

I want to congratulate Jeff Bezos for doing exactly the right thing by raising the minimum wage at Amazon and Whole Foods to $15 an hour.

Let me thank the hundreds of Amazon workers who contacted my office and the Fight for $15 movement, which has been leading this effort.

Amazon’s move comes as the retail industry heads into its big holiday selling season and competition for seasonal hires heats up in a tight labor market. While Amazon, which generates a big part of its profit from its AWS cloud-computing services and increasingly from its ad business, may be able to afford such a hike, it may be hard for traditional retailers to follow suit without a bigger impact on their bottom line.

That’s not to mention that investors have long cut Amazon more slack when it comes to spending on things they see as necessary to spur the company’s growth. Shares in
Amazon.com, whose market cap recently passed $1 trillion, were barely changed on Tuesday.

Walmart in February raised its starting wage for all hourly employees to $11, totaling $300 million in additional cost. Target said in March that it was raising its minimum wage to $12 an hour this year, with plans to raise it to at least $15 by the end of 2020. Both retailers and some others in the industry have been raising minimum wages in recent years at the cost of profit as they have doubled down on online and grocery pickup and delivery spending to vie against Amazon.

Retailers including Walmart have said higher wages have played a role in boosting employee morale and customer service. As a case in point, Walmart in August reported its best quarterly same-store sales in more than 10 years following a string of increases.

According to the Labor Department, traditional brick-and-mortar retail employees’ wages tend to lag those of their e-commerce counterparts and those who work in warehouses. In July, average hourly earnings in the retail trade for nonsupervisory employees stood at $15.91, compared with $19.92 for “nonstore” retailers. The average hourly wage for nonsupervisory workers in the warehousing and storage sector was $17.84, Labor Department data shows. Truck drivers' wages are even higher amid the ongoing trucker shortage.

An Indeed study of over 33,100 job postings found that the average hourly wages for seasonal retail workers including sales employees and managers ranged from $11.45 to $13.92, below the sector average, between June 1 and Sept. 15.

The pressure is on for the retail industry, even absent the other non-retail profit cushions like AWS that Amazon has.

I have covered the retail industry for well over a decade and written for publications including the Wall Street Journal and Bloomberg News. I have also been ranked as a top industry influencer since 2013. An innate curiosity about how things work and what sets one brand apa...